The U.S. House of Representatives recently released a long-anticipated report on the state of antitrust in consumer tech. It found that key gateways and highways online are heavily consolidated around a few Consumer Big Tech giants and that reforms of antitrust laws are needed to inject more competition into the internet.
But while the report’s recommendations are ambitious, they are not enough to take on all of the harmful effects to our culture, economy, and politics caused by consolidated consumer tech markets. One reason is that they do not tackle the law’s foundational shortcomings, which overly complicate the antitrust analysis and must be reformed. The other reason goes to the core of what modern competition laws are and what they are not, which requires looking beyond antitrust to other rules and regulations to rein in the broader societal consequences of bigness in the digital economy.
Antitrust is a body of law that protects competition. But competition is in the eyes of the beholder. The consensus used to be that protecting competition meant ensuring there were many companies jockeying for the market and that no individual company could use its size to exclude smaller rivals from the market. This approach proved a bit overzealous in its reach but it benefitted from the use of simple bright-line rules to identify situations where market conditions or structures looked out of whack with the competitive ideal, and then to intervene to restore them. So, for example, a merger that combined two competitors and left too few other rivals in a market would be prohibited absent some compelling reason presented by the merging companies.
But a modern re-reading of antitrust laws has warped the notion of protecting competition into something else altogether. Over the last half century, antitrust has become a body of law that protects the “economic efficiency” of markets. This has limited its reach to a narrow set of goals: lower prices, higher output, and more innovation. It has also orientated antitrust towards the protection of consumers to the exclusion of other market players, such as workers or competitors. And at the same time that it narrowed the type of competition to be protected by antitrust, it tossed out the bright-line rules and replaced them with a more detailed analysis that requires determining whether a given monopolistic act has, in fact, harmed competition in a market. Now, blocking the same merger of two competitors requires exhaustive proof of its harm to the consumer’s welfare.
Requiring proof of actual competitive harm by reference to a narrow set of consumer-oriented considerations defanged the antitrust laws. Enforcement proceeded down a narrowing path and hit a brick wall in consumer tech, an industry with novel, complex, fast-changing markets that revolve around providing immediate gratification to online users. A modern antitrust built on proving actual harm to competition according to consumer welfare had rendered itself defenseless against perhaps its biggest foe ever in Consumer Big Tech.
The resulting drought in tech antitrust enforcement has not been lost on anyone. Neither has the mass-consolidation of consumer tech markets and its broader societal consequences. And so the focus is now on reforming antitrust laws to kick-start their enforcement in tech in order to inject more competition online. But since nothing on the table seeks to change the requirement that plaintiffs must prove actual harm to competition by reference to a narrowly-contrived consumer welfare standard, the proposed reforms have little to offer in the way of a meaningful boost to antitrust enforcement against Consumer Big Tech.
Reinvigorating antitrust would require not just reform but a foundational reset. The simplest path lies in reviving an enforcement approach that allows for quick intervention using simple, formulaic tools which screen for certain non-competitive market conditions without requiring plaintiffs to predict actual effects on competition. That would make it easier to bring and resolve antitrust cases. But the impact on the internet’s bigness problem would be limited. Even with reformed competition laws, natural monopolistic conditions of digital markets would persist which make it difficult to find an antitrust violation and fashion effective antitrust relief to restore competition. And so looking beyond antitrust to other government solutions will also be critical to reining in the broader societal consequences of the consolidation of the digital economy.
The Tech Antitrust Enforcement Drought
A surprisingly small number of companies provide the consumer tech services that people have come to rely on day-to-day. Even as the markets grow so that consumer tech reaches into every last corner of people’s personal and professional lives, the same companies emerge again and again to fulfill the new needs. When it comes to routine internet activity (web browsing, online search, e-mail, maps, social media, messaging, word processing, shopping, streaming, apps) and its underlying infrastructure (operating systems, cloud computing, etc.) a few players reign supreme.
For convenience, people refer to these select few as Big Tech, and the largest among them are Google, Apple, Facebook, Amazon, and Microsoft (GAFAM). Consumer Big Tech is a label that singles out consumer-oriented markets from the rest of the internet that serves businesses, governments, or other organizations. The labels are crude but befitting of the role that these mega-companies play in the tech economy. After reporting record profits last quarter, GAFAM (which are publicly traded companies collectively valued at $7 trillion) have grown to one-fifth of the S&P 500 and nearly half of the NASDAQ.
Consumer Big Tech’s ubiquity causes the markets they operate in to be what antitrust experts describe as “concentrated” or “consolidated”, which is to say that a few players serve most of its users. Under antitrust laws, being a big player in a market with few competitors carries added legal responsibilities and risks. Economists generally agree that in a concentrated market a company acting alone or in concert with others has the ability to distort competition when exerting its “market power.” Strong market power can be reflected by a large market share or the ability to dictate terms with customers, suppliers, or trading partners.
In the presence of market power—whether held by a single dominant company or a small group of them that collectively share a dominant influence—some activities which restrict competition can be a violation of antitrust laws. That might include such things as blocking a competitor’s access to key inputs that it needs to compete, buying up rivals, cooperating with competitors, or locking up key customers with exclusivity arrangements. When you’re a giant, you have to watch where you step.
The high concentration seen in consumer tech markets would, on its face, suggest that the main Consumer Big Tech players enjoy market power and in some instances maybe even market dominance. At the same time, it has been widely documented that these companies have engaged in market conduct which might have excluded competitors and hindered competition. In the U.S., a recent House of Representatives report on antitrust enforcement documented how Consumer Big Tech has wielded its market power to engage in exclusionary practices and to buy up rivals. The report found that these activities stifled competition and maintained monopolies or near-monopolies in key digital markets. Outside the U.S., antitrust enforcers in the E.U. and several major countries (including the UK, France, and Germany) have released similar reports reaching similar conclusions. In Australia, the same effort yielded, again, similar results.
A rare worldwide consensus seems to have emerged that consumer-facing tech markets are dominated by a few select companies that use their market power to entrench their positions and prevent rivals from keeping more than just a sliver of the pie for themselves. The presence of market power and restrictive market conduct would seem to suggest that antitrust laws have a major role to play in consumer tech markets. It would seem a historic opportunity for antitrust enforcers to intervene in these growing markets and restore competition in them. Yet despite the apparent opportunity for a golden era of antitrust enforcement in the digital economy, the actual record of the world’s major governments suggests that they have largely shrugged it off.
Instead, we are living through an unprecedented lull in antitrust enforcement at precisely the moment when it seems the floodgates should be open and the cases pouring in. The Tech Antitrust Enforcement Drought is well documented in government reports and studies. There have been essentially zero efforts to stop acquisitions of rivals by Consumer Big Tech. And there have been almost no antitrust enforcement actions taken against these companies based on claims that they have engaged—individually or collectively—in exclusionary or restrictive conduct to prevent competition. The exception is Google, which was found to have violated European antitrust laws (though, as detailed below, the effects of those rulings has been stymied by elusive remedies) and was recently sued by the U.S. Department of Justice (a case which, as I detailed in a recent article, faces a long and highly-uncertain future).
But government efforts to study the Tech Antitrust Enforcement Drought have gone well beyond identifying the problem to also trying to understand its causes and even brainstorm solutions. The proposed reforms have taken many forms, though they generally have in common a commitment to the core modern framework of antitrust, believing only minor reforms are needed to help address specific enforcement gaps for particular types of conduct in digital markets.
For example, the House Antitrust Report would turn back the clock on court decisions that had toughened the legal standards for bringing monopolization cases against dominant firms in the U.S. This could potentially revive enforcement for certain kinds of exclusionary conduct, such as predatory pricing (for example, Amazon’s below-cost pricing tactics), leveraging of monopoly power across different markets (Google Search and its own other services, such as Shopping), tying or bundling (Apple Pay and AppStore), and refusals to deal (Facebook’s interoperability with third-party apps and services). The report also suggests some minor tweaks to the wording of the monopolization law itself so that it would more expressly reach additional categories of conduct, including abuses caused by uneven bargaining positions between business partners (for example, in Amazon’s dealings with its third-party sellers). The report would also have lawmakers slightly revise the wording of the merger laws to clarify that acquisitions of small upstarts—before they grow to a meaningful size—can violate antitrust laws (for example, Facebook’s acquisition of Instagram).
But these and most other reforms currently on the table have a limited potential to make any big changes to the enforcement of antitrust laws in tech markets. Because all of them have in common that they treat the Tech Antitrust Enforcement Drought like a single dry season, when in fact what’s happening is a Climate Change-scale shift in the environment where tech markets and antitrust laws overlap.
The limited solutions proposed by most reformers fail to appreciate that the root causes for antitrust’s incompetence in the digital era go much deeper than just a few shortcomings in the wording of its laws. The most significant are two major cracks in the foundation of modern antitrust: the requirements that, to prevail, antitrust plaintiffs must conclusively show “actual harm to competition” and that they must do so by reference to a narrow subset of considerations about “consumer welfare”.
Down the Rabbit Hole of Proving Actual Anticompetitive Effects
To understand the first of the two root causes of the Tech Antitrust Enforcement Drought, one has to first understand how antitrust cases are decided.
According to modern orthodoxy, just showing that a company is big and that it used that bigness in ways that could exclude competitors is not enough to prove an antitrust violation. Antitrust plaintiffs (government and private alike) must go a step further and prove quite conclusively that competition has, in fact, been harmed by the acts of a company. This is referred to as proving “actual anticompetitive effects.”
The origins and broader consequences of the emergence of this orthodoxy in antitrust over the last half century are more fully explored in another of my articles. Here it is enough to focus on the fact that requiring plaintiffs to prove actual anticompetitive effects has caused antitrust enforcement to run into a brick wall in many markets, especially digital ones.
Showing what will or will not (or did or did not) happen to competition as a result of a company’s conduct is very difficult to do with a reasonable degree of confidence in any market. It is all but impossible in the novel, complex, and fast-changing markets of the modern digital economy. The approach assumes a human capability to understand and predict outcomes amidst complexity that social science research and real-world experience in antitrust practice strongly suggest does not exist (as I detail here). Such prescience appears to exceed the capacity of the brain in any but the narrowest of circumstances. But even though the conditions for accurate expert prediction-making rarely exist in antitrust cases—even less so when dealing with digital markets—proof of actual anticompetitive effects remain a cornerstone of the law today.
This is not just a theoretical or conceptual gripe with antitrust laws. The havoc that proving actual anticompetitive effects wreaks on cases in day-to-day practice goes a long way to explaining the Tech Antitrust Enforcement Drought. Antitrust plaintiffs in these cases must develop massive fact records and rely on extensive economic analysis to try to prove the harmful (“anti-competitive”) effects of the defendant’s conduct. Defendants, in turn, rely on armies of lawyers and economic consultants to throw shade on the plaintiffs’ findings and kick up dust with their own economic theories and models showing the beneficial (“pro-competitive”) effects of their conduct. A non-specialist judge—or hapless jury, in some civil cases—responsible for determining if antitrust laws have been violated must then weigh all the evidence of anti- and pro-competitive effects in an effort to guess whether, on balance, the “net” effect on competition is good or bad.
Take a case where the government believes a dominant Big Tech player has shut off its rivals’ access to a market by entering into exclusive arrangements with key customers (essentially locking those customers up for itself). Proving that the company is dominant and that it has engaged in such conduct would not, in and of itself, make out an antitrust violation. The government would also have to prove that the company’s competitors have, in fact, been prevented from competing in the market. It would do this by trying to show that there was less competition in the market—measured, for example, by higher prices—than there would have been in a hypothetical alternative universe in which the exclusive arrangements had never existed. Even if the plaintiff managed to do that, the defending company could respond that its conduct actually benefitted competition in ways that outweighed its harm—for example, by pointing to cost savings that it was able to achieve and pass on to its customers as a result of the exclusive arrangements. The judge deciding the case would need to weigh all the evidence and determine whether the overall effect of the company’s conduct helped or hurt competition in the market.
It is a head-spinning analysis for judges and juries who are not specialized in the tradecraft of antitrust law and economics. But even for the antitrust experts who do this sort of thing for a living, predicting the future or analyzing a past that didn’t exist too often amounts to glorified guesswork. And with plaintiffs facing the ultimate burden of proof, courts more often than not err on the side of the defending company (I cover some examples from tech cases in the last several years here). Most cases, though, probably never even get off the ground, the potential plaintiff dissuaded by a costly, drawn out, and likely futile endeavor. This is how the requirement in the law that plaintiffs must prove actual anticompetitive effects goes a long way to explaining the Tech Antitrust Enforcement Drought.
But that’s not the end of the story. Because even in the rare tech antitrust case where the plaintiff is able to prove up a net harmful effect to competition, Consumer Big Tech still has another, almost foolproof, super-weapon at its disposal. While proving actual anticompetitive effects makes it difficult to bring an antitrust case in any digital market, the final nail in the coffin for cases involving consumer tech markets, in particular, is the type of competitive effect that is allowed to be considered in the analysis.
The Kryptonite to Antitrust Enforcement against Consumer Big Tech
The second root cause of the Tech Antitrust Enforcement Drought flows from the first. One cannot require antitrust plaintiffs to prove actual harm to competition without defining what that harm looks like. What is anti-competitive to one person could be pro-competitive to another. But while there may be no right or wrong way to define what competition is and is not, once drawn—whether by the law, the courts interpreting the law, or the enforcers deciding what cases to bring—those lines determine the reach of antitrust laws under an actual anticompetitive effects framework.
As I explain further here, the same orthodoxy that requires antitrust plaintiffs to prove actual harm to competition has also narrowed the kinds of harm that can be considered in that analysis to a version of “consumer welfare” which focuses the actual anticompetitive effects analysis on three measures of the “economic efficiency” of a market: prices, output, and sometimes innovation. This consumer welfare standard leaves out much more than it leaves in. Its two key carve-outs are: harm to market participants other than consumers and harm that takes the form of anything other than higher prices, lower output, or stifled innovation. Any such harms caused by mergers, restrictive contracts, exclusionary practices, or monopolistic conduct are lawful (at least as far as antitrust laws are concerned).
This has profound implications for antitrust enforcement in consumer tech. Under the consumer and efficiency-focused rubric of the consumer welfare standard, Consumer Big Tech’s invincibility in antitrust can be traced to its defining trait: its tremendous popularity. The products and services are free, so that makes showing inflated prices impossible. They are plenty and growing, so proving a reduction in output is out of the question. And they are designed with a singular focus on being fun and easy to use, making a theory of harm based on stifled innovation practically laughable.
With consumer tech a seeming windfall for the online users who are at the focus of the consumer welfare standard, and a burden only for the business users and competitors who are largely ignored by it, the actual anticompetitive effects balance tips heavily in favor of defendants and against plaintiffs in tech antitrust cases. Perhaps like no other industry in history, Consumer Big Tech has—even if unwittingly—weaponized the consumer welfare standard that guides antitrust.
This is the Kryptonite to antitrust enforcement for Consumer Big Tech: that bigness deployed to make a consuming public happy leaves little room for enforcers to intervene under the prevailing price-output-innovation framework. Tech companies that can point to free, ever-expanding, highly innovative products which promote consumer welfare can avoid liability in all but the most egregious cases of anticompetitive conduct.
The consequences of a consolidated consumer tech
The focus on a narrowly-defined consumer welfare standard to guide the actual anticompetitive effects analysis has done more than just create the ideal conditions for lax antitrust enforcement against Consumer Big Tech. It has also left the field blind to the broader consequences of a consolidating digital economy.
Like a dentist who whitens your teeth but overlooks cavities, modern antitrust law has helped a shiny internet to emerge while leaving untouched the rot that lies just underneath its surface. The prevailing consumer welfare standard that focuses on economic efficiency has meant ignoring significant harmful effects from the consolidation of consumer tech markets that spill over into the economy, culture, and political process. These include:
- The proliferation of misinformation and extremism on social media is widely reported as a force destabilizing civil society by causing disturbances in the electoral process, political polarization and divisiveness, and even violence. With most users flocking to a few common platforms, the scope and scale of spreading vitriol, lies, or hate is exponentially worsened by the magnifying effect of the sheer bigness of Consumer Big Tech.
- Media companies and news publishers seeking to distribute their content have become increasingly dependent on a few Big Tech platforms (such as web search, apps, smart home devices) which act as gatekeepers to most online users. They are struggling to generate profits without turning to the high-quantity, low-quality chase for eyeballs that can be monetized with advertising on those platforms. The consequent loss of high-quality and independent journalism is seen by many as a grave threat to democracy, especially in light of the unreliable content that fills the void left by the loss of the traditional press.
- The consequences of a major data breach or other security risk get larger and larger as users concentrate their data with fewer and fewer online players. The 2015 hack of a U.S. government system by the Chinese government, the 2014 hack of Sony linked to North Korea, and the 2016 Russian hack of the Democratic Party’s emails are just a few examples. Countless other hacks by private actors have swept up sensitive information about customers of Target, Equifax, Marriott, and others. But all pale in comparison to the potential harm that could follow a major data breach of one of the Big Tech players, who hold the largest treasure troves of personal data.
- The consolidation of tech markets to a few mega-players creates a hidden risk over the long-run of a transition from today’s private sector form of digital surveillance operated by Consumer Big Tech to a government-run version more akin to the Social Credit System being rolled out in China. The 2013 Snowden leaks exposing unlawful surveillance of U.S. citizens by their government offered a glimpse of the scale of the risk. Since then, the lines between private and public have blurred as Big Tech companies cooperate with law enforcement, win big defense and government contracts, and open a revolving door between government (including military) and Silicon Valley job posts. The emergence of a digital-military-industrial complex driven by private-public sector collaboration raises significant concerns about the role that Consumer Big Tech could play in shaping the conditions of democracy, civil rights, and due process.
- Big Tech has immense resources to directly influence the political process. Recent reporting has revealed extensive funding of lobbying, election campaigns, and ballot initiatives. Big Tech also donates heavily to prominent academic departments (or funds individual research projects) as well as prestigious think tanks that indirectly steer policy by guiding the public discussion on major issues. This has been shown to reach even the obscure corners of the antitrust community. Such influence is magnified in digital markets by the concentration of wealth and profit among a few very large players—GAFAM is now a fifth of the S&P 500–with serious potential (if not already a proven track record) of disrupting the democratic process.
- Large tech companies controlling the internet’s pipelines have been accused of unfair treatment of small businesses. Amazon, for example, has faced scrutiny over its treatment of third-party sellers who feel compelled to sell on its ubiquitous marketplace and become vulnerable to opaque rule changes or arbitrary treatment on the platform. And on ride-hailing (Uber) or food delivery (GrubHub) platforms, consolidation to a few providers has been attributed to the squeezing of both gig economy workers (wages) and restaurants (profit margins).
- Artificial intelligence is expected to revolutionize the internet in ways that will exacerbate many of the risks of a consolidated consumer tech. AI will allow for highly-personalized recommendations on what to buy, what to read, how to bank, where to invest, and countless other daily decisions. Searching the internet will become less an autonomous act and increasingly something steered by Consumer Big Tech algorithms. And with the AI being powered by the Big Data collected about users, the largest of the tech players are likely to have the most power to steer consumer decisions—and an incentive to prioritize their own interests or those of their business partners (lenders, sellers, etc.) above its users.
All of these risks are rooted in, or at least exacerbated by, the fact that so many users are on a few common online services offered by a select group of tech giants. And so with concentration and market dominance at the source, these problems would seem within the zone of influence of antitrust laws. Yet under the current framework, none of them actually are.
That is not by accident. It is by design. It goes directly to the prevailing consumer welfare standard guiding antitrust policy and enforcement. Generally, the interests of small businesses and gig economy workers, a free press, the integrity of the democratic process, or the broader societal risks associated with digital surveillance, data security, or misinformation, will not factor into the enforcement of an antitrust calibrated to protect economic efficiency as measured by price, output, and innovation. It comes as no surprise, therefore, that none of these risks made their way into the historic House Antitrust Report or the various digital reports put out by antitrust authorities around the world.
Does this suggest the need to redraw the lines of what is and is not an “antitrust problem” or to make other reforms to the law to reach more of the societal consequences of a consolidated consumer tech?
Reining in Consumer Big Tech with more antitrust
So observers increasingly sense that something has gone awry with the digital revolution. They can even tell that it can be attributed to the size of Consumer Big Tech and the high concentration levels in their markets—causes that seem right in the wheelhouse of antitrust laws. Yet, at the same time, they live in the reality of the Tech Antitrust Enforcement Drought, an era when efforts to stop digital mergers or abuses of dominance by the mega-incumbents have been exceedingly rare.
Might this dissonance suggest a mis-calibration of antitrust, in particular when it comes to the two root causes of lax digital antitrust enforcement: the requirement of proving actual anticompetitive effects according to a narrowly-defined consumer welfare standard?
The limitations to rethinking the consumer welfare standard
A small minority of reformers advocate for redrawing the lines of what types of competition the antitrust laws should protect. The new lines would broaden the consumer welfare standard to account for anticompetitive effects that go beyond price, output, and innovation. A more pragmatic approach would keep the focus on consumers but broaden its definition to include the interests of more market players (for example, small businesses and workers) or novel forms of competition (for example, data privacy and control). A more aggressive redrawing of the lines would introduce a broader array of societal considerations, such as income inequality and racial disparities.
Broadening the consumer welfare standard could open the door to more antitrust enforcement. It seems logical, after all, that giving antitrust plaintiffs more ways to prove how a defendants’ conduct has harmed competition would help tip the uneven scale of the actual competitive effects analysis back in favor of those bringing the cases.
But it could just as easily be that, in other cases, a broader consumer welfare standard benefits the companies defending against claims of having violated antitrust laws. That is because expanding the goals of antitrust would only compound the already overwhelming evidentiary burden that antitrust plaintiffs face in trying to prove actual harm to competition. It will give clever lawyers and economists even more ways to argue that their client’s conduct actually benefitted society, or to doom a case by sending it down the actual anticompetitive effects rabbit hole. Judges and juries could find themselves besieged by having to balance and weigh an array of considerations, including some that are difficult to measure. Cases could spiral out of control into trials about broader economic, cultural, and political concerns that no court is equipped to handle.
That to broaden a narrow consumer welfare standard which currently contributes to the underuse of antitrust could actually decrease, rather than increase, the enforcement of the law may seem counterintuitive. But that is only because consumer welfare stands in as a proxy for the deeper, more fundamental, root cause of the lack of tech antitrust enforcement: that plaintiffs are even required to prove actual anticompetitive effects in the first place. The heart of the problem is not which type of competitive harm needs to be analyzed in antitrust cases, but that antitrust plaintiffs are required to prove the existence of such harm at all (or, at least, to such a high burden of proof).
Glossing over the actual anticompetitive effects problem when discussing antitrust reform is like replacing a leaky roof on an old house before making sure its foundation will hold. Effective reform of antitrust should start with answering the most fundamental question: should plaintiffs be required to prove actual anticompetitive effects?
Tackling the root of the problem in antitrust by demoting “actual anticompetitive effects”
The House’s Antitrust Report acknowledges the challenges that arise from an actual anticompetitive effects analysis guided by the existing consumer welfare standard. But it still misses the forest for the trees in focusing its energy largely on minor tweaks to legal standards instead of reassessing the foundational shortcomings of a modern antitrust built on a framework that requires plaintiffs to prove actual harm to competition in the first place.
It is not a radical question to ask whether antitrust ought to be founded on proof of actual anticompetitive effects. Nothing preordains the currently prevailing approach. Nothing in the antitrust laws compels it. Rather, as I detail here, it is the consequence of a concerted effort by academics, policymakers, and enforcers—and receptive judges rendering precedent-setting rulings in cases—to limit antitrust with a so-called “neoliberal” school of economic thought. This doctrine disfavors intervention in private markets in any but the most limited circumstances. Introducing the requirement that a plaintiff prove actual harm to competition in order to succeed in an antitrust case (and also honing the analysis on a narrow subset of consumer welfare concerns) proved an effective way to prevent government meddling.
This modern orthodoxy can be replaced by something else just as it replaced what came before it. This is made clear by the House Antitrust Report’s calls to roll back certain court rulings that have interpreted antitrust laws in ways that curtailed them and led to less enforcement. One solution, therefore, lies in looking back to what existed before the modern neoliberal orthodoxy took hold of antitrust about a half century ago. It involves reviving from antitrust’s earlier history an enforcement approach that did not impose high burdens of proving actual anticompetitive effects. This previous approach instead relied on simpler bright-line rules that barred allowing certain market structures or conduct to prevail which might result in too few competitors or in restrictions on their ability to enter or expand in the market. In other words, proving that competition could—as opposed to having to prove that it would—be harmed was enough.
As I detail here, a modern iteration of this approach could involve a set of nonpredictive, formulaic tools for enforcing key provisions of the antitrust laws. Instead of the status quo that relies on experts’ subjective predictions about competitive effects, these tools would looks for the presence of objective criteria that identify the presence of certain market conditions (like high market shares) or conduct (like buying a competitor) which would result in a heavy presumption that a company’s actions harm competition. The company could only overcome this presumption with very strong evidence showing that its activities had actually had a positive overall effect on competition. Otherwise, it would lose the case.
The proposed approach bypasses the burdensome and enforcement-squelching actual anticompetitive effects analysis in most cases. Instead, most cases would focus on identifying and preserving the structural market conditions understood to promote a competitive environment with many rivals and minimal restraints on their abilities to enter and expand. Generally, this approach errs more on the side of intervention in concentrated markets, while leaving some room for defendants to prevail in the exceptional case where things are not as anti-competitive as they may seem based on the market structure and conditions.
The House Antitrust Report partially embraces this concept for antitrust laws governing mergers and acquisitions. It draws from Supreme Court precedent—still on the books but no longer followed—which says that any merger creating high concentration in a market based on the combined shares of the merging companies is presumed unlawful, absent a strong showing by the parties that their merger will actually benefit competition notwithstanding its consolidating impact on the market. Though not eliminating the analysis of actual anticompetitive effects, this approach reserves it for the rare case in which the merging parties have a very strong argument that a merger creating presumptively anticompetitive market conditions is, in fact, pro-competitive.
The proposal in the House Antitrust Report to revive this “structural” framework in merger cases is a significant acknowledgment—at least implicitly—that the current enforcement approach requiring antitrust plaintiffs to predict actual anticompetitive effects is flawed. However, the report does not go far enough in tackling the scope and scale of the problem. In particular, the logic is not extended to other areas of antitrust law where, as I propose here, it might be a good fit and a necessary step for reinvigorating antitrust enforcement more broadly.
But the strength of a nonpredictive, formulaic approach lies not only in tackling the concentration of digital markets by alleviating modern antitrust’s burdensome inquiry into actual anticompetitive effects. It also takes head-on the Kryptonite to antitrust enforcement against Consumer Big Tech: the narrow defining of antitrust’s consumer welfare standard according to price-output-innovation considerations that heavily favor the tech giants and their consumer-focused products. And it does so without getting into a messy redrawing of the arbitrary lines between what is and is not a valid concern of bigness for antitrust—instead largely side-stepping the thorny issue altogether.
This flows simply from the fact that the consumer welfare standard has an outsized impact on the outcome of antitrust cases only because plaintiffs are required to prove actual anticompetitive effect in the first place. But demote the latter, and the former shrinks in significance. That is, if antitrust turns on the question of whether certain presumptively anticompetitive market structures or conditions exist and not on proving actual harm to competition, in the vast majority of cases there would be no need to delve into an analysis of actual anticompetitive effects. This, in turn, would mean that how the consumer welfare standard (or any other standard used to measure competitive effects) is defined would have little bearing on a case’s outcome.
As I detail in my article, such an approach does not come without its own challenges. The main one is in identifying the market structures and conditions to be screened as most conducive to competition, which means coming full circle to the question of how to define the type of competition the antitrust laws are to protect. A combination of social science research (suggesting a few objective factors is best), previous antitrust case law (screening for factors such as the number of competitors and concentration levels in a market), and new empirical research on past antitrust enforcement actions taken and not taken (for identifying additional factors) could inform how to objectively identify the ideal structures and conditions for competitive outcomes in markets. And it is much better to resolve these questions as a policy matter upfront, rather than leave it to courts and enforcers to decide on an ad hoc basis in individual cases. Moreover, once policymakers have drawn the lines, a formulaic, nonpredictive approach ensures that their enforcement will be less burdensome on enforcers, plaintiffs, and courts. It may result in overreach in some cases and miss enforcement opportunities in others, but the results will be transparent, predictable, and fast. In any event, it is much preferred to doubling-down on a deeply flawed status quo has a proven track record of failure at reining in bigness in tech.
What is needed to revive antitrust enforcement in tech (and elsewhere) is not just a recalibration but rather a reset of the laws. This reset could revolve around a simpler nonpredictive, formulaic framework that shifts the focus to preventing the market conditions which create concentration and restrict competitors, thereby avoiding the competitive effects rabbit hole and rendering most antitrust cases agnostic to the specific kinds of harm to competition that are being prevented. Such an approach would bring more aggressive antitrust enforcement. It would lower the bar for antitrust plaintiffs bringing cases. And it would simplify court proceedings and their decisions. But it would still be far from the end of the story for curing the ails of bigness in consumer tech.
Reaching the outer boundaries of antitrust’s gravity
But even a simpler, nonpredictive approach to antitrust enforcement is not without its limitations. Antitrust’s influence over Consumer Big Tech would remain limited as the natural monopolistic tendencies of the industry would continue to make it difficult to find a violation of the law or to fashion effective relief.
Merits-based monopolies: Big Tech’s ultimate antitrust defense
There exists an overarching—and likely unavoidable—constraint on the reach of antitrust laws over Consumer Big Tech which cuts across all of of law’s individual shortcomings: that monopolies attained “on the merits” are perfectly legal.
Antitrust does not condemn having market power or happening to operate in a concentrated market. As far as competition laws are concerned, it is lawful for a company to design, develop, and market its way to market dominance. It is also lawful to organically grow into a monopoly as a result of the natural or innate conditions of the market. It is only what a company does with its market power—like when it buys a rival or locks out competitors from accessing a key input—that can get it into trouble.
Consumer tech provides the perfect case study for what this looks like in the wild. An argument could be made that monopolies are the natural state of some consumer tech markets. With online platforms, in particular, everyone naturally gravitates to a few common services, resulting in a sort of “natural monopoly.” Social media and messaging (Facebook) work best when everyone uses the same service. Online shops (Amazon, Apple) are more convenient for buyers and sellers alike if they are on the same platform. A company, its clients, and even an entire industry will gravitate to a common set of productivity tools (Microsoft) for a more seamless workflow. In all these examples, the value of the service increases with its number of users (what economists call “network effects”), which acts like a natural force driving the market to monopoly or near-monopoly.
Reliability and security concerns also send users to the larger tech providers. Even if there are safe and reliable small tech providers—and the big ones surely have their own hiccups—it cannot be a surprise that users would gravitate to larger tech companies for more dependable connectivity and stronger security. Similarly, users handing over troves of sensitive personal information want to be able to trust its keeper. No matter what its commitments to users today, a small tech player and the personal data it holds may be sold tomorrow to an unknown buyer with unknown motivations. By contrast, Google has been here since you opened your email account a decade ago, and there’s a good chance they’ll still be here in 2030. All of this might help explain why consumers continue to give Big Tech high scores when in comes to trustworthiness, notwithstanding a barrage of negative press coverage. The devil you know.
Fast user growth also allows a chosen few tech players to benefit from increasing “returns to scale.” This is the advantage that a tech company enjoys from being among the first to cover its high up-front costs (from, for example, product development) and benefiting from very low costs (on a per-user basis) as it expands. At the same time, as users flock to it service, the company is the beneficiary of even more data that it can use to make its service even more effective, more integrated, more comprehensive—which, in turn, attracts even more users. These powerful runaway effects not only drive users to Consumer Big Tech, they also erect ever-higher barriers in the market that make it difficult for rivals to emerge. This reinforces or insulates market consolidation and the privileged position held by its few largest incumbents.
The positive feedback loop between users and Consumer Big Tech explains why certain digital markets have naturally tended towards monopolistic (or oligopolistic, as economists call a market with a few large players) conditions. It is why Facebook holds such a large share of social media, Google of internet search, Amazon of online retail, and so on. And none of it is—or ought to be, for that matter—unlawful under antitrust laws. Such laws should intervene in private markets only when companies attain, protect, or expand market power by taking proactive steps to prevent others from competing against them.
This has serious implications for the discussions about reforming antitrust to bring about more enforcement that reinvigorates competition in the digital economy. The fact that much of the dominance of Consumer Big Tech may be due to natural market conditions or competition on the merits means that any antitrust reforms being considered cannot be expected to bring a lot of new enforcement to rein in the industry’s bigness (and its consequences). That extends even to the more aggressive reforms that have been proposed here, like demoting the role of the actual anticompetitive effects analysis and side-stepping the confining consumer welfare standard. Because while such reforms may trigger more antitrust enforcement that stops Consumer Big Tech from buying up or excluding rivals, they would do nothing to tackle monopolistic conditions resulting from organic growth and the natural tendencies of digital markets.
The remedy end-game: empty victories in tech antitrust cases
Even if a government enforcer or private plaintiff is able to overcome the heavy burden of making out a violation of antitrust laws against Consumer Big Tech, there still exists a final limiting factor for such cases. It occurs on the back end, when a court must impose a remedy to try to restore the competition lost as a result of the defendant’s conduct.
A strong consensus among antitrust enforcers is emerging that to simply impose fines on monopolists as a deterrent is not enough. The reasons are obvious when dealing with deep-pocketed Consumer Big Tech giants. The E.U., for example, has imposed record fines on Google of around $9 billion across three separate antitrust cases, but that amount pales in comparison to the company’s revenues ($162 bn) and profits ($34 bn) in 2019 alone. And so the attention has turned to conduct remedies, which are orders by courts or government enforcers that require a company to act (or not act) in specific ways in order to restore competitive conditions to a market which were lost as a result of a violation of antitrust laws.
In a prospective digital merger, a conduct remedy can be quite straightforward: an injunction blocking the deal. But in digital monopolization cases involving a firm’s efforts to exclude competition, crafting an effective remedy can be tricky. For one thing, it can be difficult to restore competition after many years of exclusionary acts by a dominant firm which have permanently reshaped the structure of the market. For example, as I discuss here, injunctions by European officials to stop Google from preferencing its own shopping service in its search results have proven ineffective at restoring traffic to competing third-party shopping services. Another recent failure was a set of conduct remedies imposed by the E.U. against Google to bring more competition to the web browser market by giving smartphone users more choices when selecting their default browser. It has turned out to be too little, too late, for a market in which Google’s Chrome browser has become deeply entrenched.
Another problem with conduct remedies is that it can be impossible to restore competition to one part of the market without causing new harm to another. In the E.U.’s Google Shopping case, for example, the authorities crafting the remedy turned a blind eye to the possibility that ordering Google not to self-preference its own service could deteriorate the user experience on Google Search. Similarly, in a pending civil case claiming Apple violated antitrust laws in restricting how app developers can use the AppStore and Apple Pay, it is not clear what remedy would open up the market to more competition without at the same time undermining the security and quality controls that Apple achieves with its “walled garden” ecosystem.
But even if an effective remedy is possible, getting it can take a very long time. It requires building a case, filing it, winning it, and then prevailing on appeal. A series of related government antitrust cases against Microsoft that made out successful claims of monopolization of digital markets involving PCs spanned three presidential administrations during the 1990s and 2000s. Private antitrust lawsuits in civil court can also last a decade or more. In the interim, the restrictive market practices at issue in the case often continue unabated, further entrenching the monopolistic conditions of the market (and potentially enriching the monopolist).
Finally, conduct remedies in any given antitrust case will apply only to the parties who are before the court. Courts have no authority to impose market-wide remedies in response to a case brought against a single company (or small group of them) for a specific set of conduct. This means that, other than serving as a warning shot that puts other companies on notice about what sort of market practices are unlawful, antitrust remedies cast their net narrowly. And even the deterrent effect may not be felt industrywide if the remedy arises from a factually distinguishable case that is based on the sort of individualized circumstances which predominate in antitrust cases involving complex and novel tech markets.
And so it turns out to be much easier to identify the absence of competition in digital markets, and even to attribute it to specific conduct by its Big Tech players, than it is to impose conditions on those markets which can restore competition. The implication is quite damning for the prospects of using antitrust to rein in tech. It means that enforcement outside of a narrow set of cases—mainly, those involving before-the-fact review of mergers and perhaps some clear-cut monopolization abuses—has limited potential to bring more competition to consolidated digital markets.
The challenges of finding antitrust violations and imposing antitrust remedies in digital markets that are rife with the natural conditions of market monopoly do not reflect a failing of the competition laws. These are, rather, antitrust’s natural boundaries, which can only be drawn so wide to reach concentration and market power while still providing a predictable, transparent, and rigorous rule of law. It means that high levels of concentration will lawfully persist in consumer tech with the implementation of even the most aggressive antitrust reforms being considered. It also means that the formulaic, nonpredictive framework proposed here lies in the outer boundaries of the gravitational pull of antitrust laws. Beyond it Consumer Big Tech would be in free-float and operate with impunity from antitrust liability, another physical force having to emerge to tackle the societal spillover effects stemming from its continued bigness.
Like a hammer that only sees nails, antitrusters seem to conceive of only one solution to any problem that arises from consolidation and dominance in markets: more antitrust. But the complete answer lies in looking beyond antitrust.
Antitrust laws have inherent limits that suggest it unwise to grant them exclusive province over regulation of market concentration in the economy. So it is inevitable that policymakers would look beyond antitrust to other legal or regulatory regimes suitable for tackling the broader consequences of consolidated tech markets.
An analogy can be made to the evolution in thinking about globalization. After decades of being blinded by the immense wealth created from liberalizing global trade and opening up international borders, many now acknowledge a policy failure in not having spotted and then reined in the policy’s negative spillover effects. That includes, in particular, an unequal distribution of the largesse and the loss of redundancies in supply chains for critical goods. Supporters of globalization dismissed these criticisms on the grounds that other rules and laws—outside of trade regulation—would be responsible for tackling any broader societal side effects going beyond the gains from trade that bring with them economic efficiency and wealth. Of course, what actually happened was that unfettered globalization came, and talk of tackling its “other” consequences fell by the wayside. The resulting backlash—in politics, economics, and civil society—has become evident as it now threatens to disrupt the post-war liberal world order.
And so also with the neoliberal movement in antitrust, policymakers blinded by the potential for a hands-off approach in markets to bring lower prices, higher output, and more innovation have been unable to see the broader societal spillover effects arising from the unbridled growth of Consumer Big Tech. Like the pro-globalization crowd, supporters of a limited modern antitrust respond “not our problem” when confronted with the full consequences of a laissez faire approach to the competition laws. And so debates center on issues such as whether antitrust laws should make it illegal for Google Search to give preferential positioning to Google’s other online services. Meanwhile, the significant broader, systemic risks that came with Big Tech’s control of the infrastructure and data that runs the internet go largely ignored because they don’t fit neatly into an antitrust mold.
If globalization should have been accompanied by separate policy providing social welfare protections to exploited peoples abroad and displaced workers domestically, then antitrust should be accompanied by separate rules and regulations that target the broader side-effects of market concentration which the competition laws do not—or cannot—reach. There is no reason to wait for shocks to provide the opening as, for example, the rise of far-right political populism, Brexit, and COVID-19 have been for discussions about unchecked free trade and globalization. More than enough is already known that can inform forward-thinking policy which looks beyond antitrust to tackle the challenges of a consolidating tech economy. Some ideas might include:
- As previewed in the House Antitrust Report and under works in the E.U.’s forthcoming Digital Services Act, new rules could require large tech companies to share with their smaller rivals certain user data that is key to competing in a market. Such rules might also require that tech companies make their services interoperable with competing services, or that they make the data they collect more portable by users wanting to switch to competing services. Forced data sharing, interoperability, and portability could inject competition into digital markets by breaking down some of the natural market conditions which, while remaining out of the reach of antitrust laws, nevertheless foster digital monopolies. Such rules would also achieve the sort of instant and industrywide relief that the case-by-case, defendant-by-defendant approach of antitrust enforcement cannot.
- Many expect a national data protection law to be enacted to tackle the security and privacy risks that users face as a result of the mass collection of their personal data by a few Big Tech companies. The E.U already has such a law, as does California. Data privacy laws could set baseline best practices on which data is collected, how it is used, and what sort of security measures must be undertaken by its keepers. Such measures go beyond the capacity of antitrust laws, which make for an awkward fit when trying to treat data protection or privacy concerns as elements of competition, and whose narrow remedies cannot create a single level playing field across a whole market.
- Laws to protect smaller businesses dependent on Big Tech platforms might also emerge. As detailed in the House Antitrust Report, business users face non-transparent terms and conditions, unfair complaints procedures, take-it-or-leave-it contracts, as well as unclear and discriminatory enforcement of platform rules. Online publishers struggle to make a profit in a landscape where the Big Tech platforms act as gatekeepers to most users. All are issues resulting from the unequal bargaining position between Big Tech providers and their business partners. But they are fundamentally about fairness, and less so about a harm to competition of the sort the antitrust laws are designed to handle. Industry regulations and rules requiring equal and transparent treatment, or preventing platform operators from entering adjoining markets that create incentives to mistreat business users, could follow.
- Talks of reforming Section 230—a U.S. law that gives Consumer Big Tech sweeping protections from liability for user-posted content—could impact the obligations of tech companies to monitor, report, and control content on their platforms. Depending on what shape they take, the reforms could play some role in mitigating the role of the social media platforms as the means by which misinformation and harmful content proliferate to very large numbers of people—consequences of a consolidated Consumer Big Tech over which the competition laws simply have no say.
- Some parts of the internet may be deemed so critical to the functioning of the economy and society that they may end up being directly regulated as public utilities, similar to electricity or water. Such regulation could include more directly dictating how users are to be treated, who has access to the service, and other decisions considered too important to be left to the free market. The need for tight controls may be strongest in emerging technologies like machine learning and artificial intelligence, which have significant potential to abuse, deceive, or exploit in consumer-facing tech markets. Calls for utility-like regulation will be loudest where quick market-wide change is needed, something that antitrust remedies do not offer.
- Beyond industry regulation, there may even be the need for more direct government involvement in running certain industries that exhibit especially strong tendencies towards monopoly with few attendant benefits from a free market. This could go so far as to have the government enter certain markets or to at least run their necessary infrastructure. The U.S. Federal Reserve, for example, is following the lead of other countries in creating a real-time digital payments system that will allow individuals and businesses to instantaneously transfer money for low (at-cost) fees. Such solutions are not only unachievable under the antitrust laws, they are antithetical to them.
- Then there are the various other broader consequences of private market concentration, each requiring its own targeted solution. Reforming campaign financing and lobbying rules would factor in to discussions surrounding Big Tech’s political influence. Tax code reforms and laws breaking down barriers to unionization could help tackle wealth and income inequality. Universal basic income as well as more access to free health care and higher education could mitigate the effects of workforce displacement caused by the automatization and consolidation of industries during the digital transformation of economies. All have in common that they are non-antitrust solutions to antitrust-like problems concerning market power and consolidation.
- Governments could even rely on their “soft powers” to help educate people on how to be smarter consumers who place a stronger emphasis on privacy over convenience, quality over price, or positive over negative uses of the internet. In Finland and France, for example, school curriculums includes information literacy such as how to tell truth from lies, identifying misinformation, and critical thinking while surfing the internet. Such efforts could help shift the course of tech markets, which are highly responsive to the wants and preferences of consumers.
These are just a few of what are many creative tools that governments have at their disposal to go beyond the narrow confines of the antitrust laws in dealing with the consequences of the internet’s bigness problem. Alongside a reformed and invigorated antitrust, a patchwork of other laws, regulations, and government interventions could, collectively, provide a wholistic approach to reining in the various cultural, economic, and political reverberations of Big Tech’s digital revolution.
A half-century devolution of the competition laws has left enforcers ill-equipped for combatting bigness in the digital economy, especially in consumer tech markets. Antitrust has been arbitrarily aimed at a narrow subset of consumer-oriented harms that leave out some of the most significant consequences of a consolidated Consumer Big Tech. The result has been that monopolies which leave the consuming public happy lie largely beyond the reach of modern antitrust law. But the true culprit behind the disarming of antitrust in tech has been the increased burden put on plaintiffs to prove actual harm to competition in order to make out a case. This requirement has created a quagmire for plaintiffs in cases involving difficult-to-understand and even-more-difficult-to-predict digital markets, and a weak spot for defendants to exploit by sowing confusion and doubt in the minds of overwhelmed government enforcers and courts.
It has now become mainstream to criticize antitrust laws. That has included many observations about their failures to rein in Consumer Big Tech. But because the root causes for antitrust’s failures are poorly understood, the reforms being proposed would do little to cure what ails the floundering body of law. If anything, policymakers and enforcers seem intent on doubling down their bet on a fundamentally flawed framework, resigning themselves to minor tweaks which might bring some added enforcement in a few limited areas. But a total reshuffling of the law is needed in order to bring antitrust back to a simplified, nonpredictive enforcement approach that depends less on analyzing actual competitive effects and more on bright-line rules that protect market conditions with many market players, low entry barriers, and little exclusionary conduct.
But the solution is not just more antitrust. Even the most aggressive measures to stretch the reach of competition law to its outer boundaries would accomplish only so much. Part of that is the difficulty of fashioning relief in tech cases which can actually restore competition. But the main limiting factor is Consumer Big Tech’s nearly full-proof defense to antitrust liability: that many of its monopolies form organically from a combination of competition on the merits with better products and taking advantage of innate characteristics of digital markets that cause them to naturally drift towards non-competitive conditions. That will never be something that antitrust can, or should, try to fix. So it is only by going beyond antitrust, with a wide array of other rules and regulations, that there is any hope of reining in Consumer Big Tech so that its powers can be harnessed for the good of society and restrained from doing harm to it.